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Kerry Group has entered into an agreement to sell Kerry Dairy Holdings (Ireland) Limited to Kerry Co-Operative Creameries Limited for an expected total consideration of €500 million.

This transaction marks a pivotal step for Kerry Group as it transitions to a pure play in taste and nutrition solutions, shedding its dairy operations to sharpen its focus on core competencies.

The proposed sale involves Kerry Dairy Ireland, which encompasses a wide range of dairy consumer products and ingredients, including popular brands such as Dairygold and Cheestrings.

The division generated revenues of €1.28 billion in the fiscal year 2023, highlighting its substantial presence in the UK and Irish markets. However, the division also faced a decline in revenue compared to €1.54 billion in 2022, alongside a drop in EBITDA from €70.7 million to €53.4 million.

Under the terms of the agreement, Kerry Group will initially retain a 30% stake in Kerry Dairy Ireland, with plans for the Co-Op to acquire full ownership in a phased manner over the coming years. This phased approach is designed to ensure a smooth transition and continuity in operations, with the Co-Op expected to take control of 70% of the dairy business in the first phase of the transaction.

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The transaction is structured to enhance both entities' operational focus. Kerry Group aims to concentrate on its burgeoning taste and nutrition segments, which serve the food, beverage and pharmaceutical industries.

With a growing emphasis on health and wellness, Kerry has been developing its portfolio in proactive health, food protection and preservation technologies, with a focus on sustainable nutrition.

Kerry Group's CEO Edmond Scanlon said: “The proposed transaction represents a significant step in Kerry’s journey. Our strategy of continuous business development aligned to our customers has been a key underpinning of Kerry’s success.”

This move is expected to streamline operations and allow Kerry to allocate resources more efficiently toward its strategic priorities.

The sale will also create a vertically integrated dairy player within Ireland, enhancing the Co-Op's ability to serve dairy farmers and the broader agricultural community. This integration is anticipated to strengthen Kerry Dairy Ireland's market position, enabling it to capitalise on growth opportunities within the dairy sector.

Financially, the transaction is expected to have a positive impact on Kerry Group’s overall metrics, including an improved EBITDA margin and revenue growth profile. The cash proceeds from the sale will be used for general corporate purposes.

As part of the agreement, a fund of €50 million will be established to address ongoing disputes between Kerry Creameries Limited and certain milk suppliers, ensuring that these issues are resolved amicably as the transition unfolds.

The deal is subject to approval from Kerry’s independent shareholders and the Co-Op’s members, alongside customary regulatory approvals. A general meeting is scheduled for December 19 2024, where shareholders will vote on the proposed transaction.

Kerry in the news

Earlier this month, Kerry announced the acquisition of DirectSens’ LactoSens technology – a fast, accurate and cost-effective lactose detection solution for the dairy sector.

The acquisition will enable Kerry to complement its offering in lactase enzymes, with the tool working alongside Kerry’s ingredient solutions, enabling a more integrated offering for food manufacturers.

Read more about the deal here.

In October, Kerry Group introduced an Egg Reduction Guide designed to help manufacturers calculate the financial and environmental benefits of reducing egg content in baked goods.

This initiative comes as fluctuating egg prices and new animal welfare regulations pose significant challenges for the baking industry.

The egg market has been affected by recent volatility, exacerbated by avian flu outbreaks and the European Union's phased ban on caged-hen eggs, set to be fully implemented by 2027.

Read more about the new solution here.

Image: © Dairygold website.

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